NEW DELHI, Oct. 29 (UPI) -- The Reserve Bank of India Tuesday raised the interest rate by 0.25 percent to 7.75 percent on inflation concerns.
While the policy repo rate rose to 7.75, the marginal standing facility rate was lowered by a similar 0.25 percent to 8.75 percent, the bank announced on its web site. The MSF rate is the rate at which banks can borrow funds overnight from the central bank against government securities.
"On inflation, both wholesale and consumer price inflation are likely to remain elevated in the months ahead, warranting an appropriate policy response," Bank Gov. Raghuram Rajan said in his review.
He said globally, the outlook has improved modestly and "the prospect of delay in the taper of the" the U.S. Federal Reserve's bond purchases has brought calm to financial markets.
The Indian rupee has been strengthening lately after being battered in recent months on concerns the U.S. central bank may begin to taper off its easy monetary policy which had helped pump cheap money for investing into emerging markets like India.
On the domestic front, Rajan said while industrial activity had weakened, exports have been strengthening and there have been signs of revival in some services. He said these factors along with expected pick-up in agriculture could increase the real GDP growth from 4.4 percent in the fiscal first quarter to an estimated 5 percent for the whole year.